OGJ Newsletter

Dec. 19, 2016
International news for oil and gas professionals


Trump taps Tillerson, Perry for cabinet positions

President-elect Donald J. Trump said on Dec. 13 that he will nominate ExxonMobil Corp. Chief Executive Officer Rex W. Tillerson as his cabinet's Secretary of State. "His tenacity, broad experience and deep understanding of geopolitics make him an excellent choice," Trump said.

The following day, Trump announced his intention to nominate former Texas Gov. Rick Perry, who said he would abolish the US Department of Energy during one of his presidential campaigns, to lead DOE in the next administration. "As the governor of Texas, Rick Perry created a business climate that produced millions of new jobs and lower energy prices in his state, and he will bring that same approach to our entire country as Secretary of Energy," Trump said.

Tillerson, a native Texan who joined Exxon USA in 1975 as a production engineer, rose through the company to become ExxonMobil's president in 2004 and chairman and chief executive officer in 2006. "Among the most accomplished business leaders and international dealmakers in the world, [he] has spent his career protecting the jobs of his employees, who number more than 70,000," the Trump Transition Team said.

American Petroleum Institute Pres. Jack N. Gerard said of Trump's pick: "Rex Tillerson is world class. He has decades of experience working with global leaders and overseeing the creation of thousands of jobs," adding, "His relationships, and in particular those with other nations, will help further advance US interests across the globe."

One of those relationships, however, already has raised questions among US senators, espically Democrats, who must confirm Tillerson's appointment. In January 1998, he was promoted to vice-president of Exxon Ventures (CIS) Inc. and president of Exxon Neftegas Ltd. In those roles, he oversaw ExxonMobil's holdings in Russia and the Caspian Sea as well as the Sakhalin I consortium operations off Sakhalin Island.

Tillerson met Russian President Vladimir V. Putin around that same time, and the pair became well acquainted. Senate Democrats and some Republicans may ask during the early January confirmation hearing before the Foreign Affairs Committee whether this could compromise his effectiveness as Secretary of State at a time when US-Russian relations have grown decidedly cool.

Meanwhile, API's Gerard welcomed Perry's selection and urged the nominee to make LNG exports a top priority at DOE. The department is responsible under the Natural Gas Act for determining whether applications to export LNG to countries that do not have a free-trade agreement with the US are in the national interest.

US Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-Alas.) said on Dec. 14 that she looks forward to discussing a wide range of issues with Perry, "including the high cost of energy in Alaska, the United States' innovation excellence, the future of nuclear energy, LNG exports, and the Strategic Petroleum Reserve.

Quebec assembly passes oil, gas legislation

Quebec's National Assembly has approved legislation hailed by oil and gas companies as vital to tapping potential of unconventional reservoirs but resisted by environmentalists.

Bill 106 implements Quebec's clean-energy plan and includes a section, the Petroleum Resources Act, providing for licensing of exploration and production.

Questerre Energy Corp., Calgary, which holds an interest in a deferred exploration project targeting the Utica shale in Quebec's St. Lawrence Lowlands, welcomed the legislation.

Pres. and CEO Michael Binnion called it "a milestone for Quebec." He said his firm and others had lobbied more than 6 years for "a modern law to develop oil and gas."

Greenpeace Canada spokesman Patrick Bonin called the legislation, passed after an overnight debate on Sept. 10, "obviously a way for the government to please the industry."

Quebec has no marketable oil or gas production but holds potential in the Utica shale and other formations along the St. Lawrence River and on Anticosti Island.

In eastern Quebec, Junex Inc. of Quebec City recently ended an extended production test of its Galt No. 4 discovery well and has a permit to drill the Junex Galt No. 6 horizontal well (OGJ Online, Nov. 29, 2016).

Chevron sets 2017 capital budget at $20 billion

Chevron Corp. has cut its planned capital and exploratory investment program for 2017 by 15% from this year and 42% from 2015 to $19.8 billion, which includes $4.7 billion of planned affiliate expenditures.

"Our spending for 2017 targets shorter-cycle time, high-return investments, and completing major projects under construction. In fact, over 70% of our planned upstream investment program is expected to generate production within 2 years," said Chevron Chairman and CEO John Watson.

Of the $20 billion, $17.3 billion will be directed toward the firm's upstream divisions, with international operations receiving $11.6 billion and US receiving $5.7 billion.

About $8.5 billion of planned upstream capital spending relates to base-producing assets, including $2.5 billion for shale and tight investments, the majority of which is slated for Permian basin developments in Texas and New Mexico.

Another $7 billion of the planned upstream program is related to major capital projects currently under way, including $2 billion toward the completion of the Gorgon and Wheatstone LNG projects in Australia, and $3 billion of affiliate expenditures associated with the Future Growth Project-Wellhead Pressure Management Project at Tengiz field in Kazakhstan.

Global exploration funding accounts for $1 billion of the total upstream budget, and the remainder is primarily related to early stage projects supporting potential future development opportunities, the firm says.

Total downstream spending is expected to be $2.2 billion, with US downstream receiving $1.6 billion and international downstream receiving $600 million.

Swiss-Qatari combine to buy Rosneft stake

Glencore PLC and Qatar's sovereign wealth fund plan to buy 19.5% interest in Rosneft for €10.2 billion.

Glencore, of Baar, Switzerland, confirmed the combine is in "final-stage negotiations" for the transaction.

The Swiss natural-resources conglomerate plans to commit €300 million in equity. The balance will come from Qatar Investment Authority and nonrecourse bank financing.

The deal includes a 5-year offtake agreement of 220,000 b/d for Glencore's marketing business.

Glencore said the transaction also provides "additional opportunities, through a strategic partnership, for further cooperation, including infrastructure, logistics, and global trading."

Rosneft to buy 30% stake in Zohr field off Egypt

Rosneft PJSC has agreed to acquire 30% participating interest in the Shourouk concession and its supergiant Zohr gas field offshore Egypt from Eni SPA for $1.575 billion.

The purchase price includes consideration of $1.125 billion and the pro quota reimbursement of past expenditures that amounts to $450 million. Rosneft also has the option to buy an additional 5% stake under the same terms.

Eni, through its subsidiary IEOC Production BV, will hold 90% interest in the block following completion of the recently agreed upon sale of 10% to BP PLC.

"This agreement further confirms the success of Eni's dual exploration model, which, in parallel with an accelerated development of the hydrocarbons reserves, aims at early monetization of the value through the dilution of the high participating interest owned in huge exploration discoveries," the Italian multinational firm said. The model has generated $6.3 billion in cash over the last 4 years.

Zohr field, discovered by Eni in August 2015, holds an estimated 850 billion cu m of gas in place. Production is expected by yearend 2017.

Exploration & DevelopmentQuick Takes

Two OCS planning areas withdrawn off Alaska

US President Barack Obama has withdrawn 40,300 sq miles of the Outer Continental Shelf off western Alaska from oil and gas leasing. An executive order creating the "Northern Bering Sea Climate Resilience Area" excludes the Norton Basin and St. Matthew-Hall planning areas from future OCS lease sales.

Both areas are adjacent to the state coast. The action came the day after Alaska's congressional delegation sent the president a letter requesting that he not further limit oil and gas leasing off their state.

Delek Group approves Leviathan development plan

Partners in the Leviathan natural gas project offshore Israel plan to start gas production by yearend 2019.

Stage 1A of the development plan has a proposed budget of $3.5-4 billion with estimated capacity of 12 billion cu m of gas/day, according to reports from Delek Group subsidiaries Delek Drilling Ltd. and Avner Oil Exploration Ltd.

In September, NBL Jordan Marketing Ltd., a wholly owned subsidiary of the Leviathan partners, announced a plan to supply as much as 45 billion cu m of gas at the Jordan-Israel border to National Electric Power Co. of Jordan.

Noble Energy Inc., which operates Leviathan field with a 39.66% interest, said in September it had signed contracts with Israeli buyers for 100 MMcfd of Leviathan gas.

Delek Drilling and Avner Oil Exploration hold 22.67% interests each. Ratio Oil Exploration (1992) LP holds 15%.

Continental logs new record STACK Meramec well

Continental Resources Inc. flowed 4,6642 boe/d, of which 45% is oil, in its 24-hr test of the Angus Trust 1-4-33XH well, which is immediately north of the Boden 1-15-10XH well in south-central Blaine County, Okla.

Continental referred to its Angus Trust well as "a new company record" in the over-pressured Meramec oil window of the Oklahoma STACK play. The test yielded 2,088 bbl of oil and 15.3 MMcf of gas flowing at 5,200 psi.

At completion, the Boden 1-15-10XH produced 3,508 boe , of which 28% is oil, with a flowing casing pressure of more than 5,000 psi. According to Continental, Boden was its first completion in the condensate window of the STACK. In just over a year, the well has produced 591,000 boe with current production at 1,815 boe/d at a pressure of 2,900 psi.

Continental estimates its total completed well cost for the Angus Trust is $8.9 million, a 30% reduction from the cost of its Boden well. Both wells were completed similarly with 9,500-ft laterals in 36 stages and 20 million lb of white sand.

The company cited strong production in North Dakota and Oklahoma in 2016 and has increased its yearend estimate at 213,000-218,000 boe/d and expects to maintain this level through first-quarter 2017. The company's previous guidance was 205,000-210,000 boe/d. In February, Continental reduced its annual capex to $920 million from its planned $2.7 billion.

Oman launches 'living data room'

The Oman Ministry of Oil and Gas is providing an online platform for advanced evaluation of four blocks offered in its Oct. 23 bid round. Blocks 30, 31, 49, and 52 are visible in the ministry's online interface where interested parties can search visualizations and analysis of available blocks and view high-quality raw data for each block.

Bidding is expected to close on Feb. 15, 2017, and bidding results will be announced on Mar. 15.

Following a pledge by members of the Organization of Petroleum Exporting Countries to curb output by 1.2 million b/d on Nov. 30, Oman was among the dozen non-OPEC producers that agreed to cut oil output by an additional 558,000 b/d (OGJ Online, Dec. 13, 2016). The cuts are slated to begin Jan. 1.

Drilling & ProductionQuick Takes

Shell starts oil output from Malikai off Malaysia

Royal Dutch Shell PLC has started oil production from the Malikai tension-leg platform 100 km offshore the Malaysian state of Sabah. Peak production is expected to reach 60,000 b/d.

Malikai is the first deepwater TLP in Malaysia and the first Shell TLP outside of the Gulf of Mexico. Shell notes production wellheads on deck are connected directly to subsea wells by rigid risers, enabling simpler well completion, and providing better control over production from the reservoir and easier access for downhole intervention operations.

Oil and gas are sent 50 km to the Kebabangan oil hub for processing before evacuation to the Sabah oil and gas terminal.

Lying in 500 m of water, Malikai is Shell's second deepwater project in Malaysia following the startup of the Gumusut-Kakap platform in 2014. Shell operates the Malikai project with 35% interest. Partners are ConocoPhillips Sabah Gas Ltd. 35% and Petronas Carigali Sdn. Bhd. 30%.

Shell says its global deepwater business currently produces 600,000 boe/d, and is expected to increase to more than 900,000 boe/d by the early 2020s from already discovered, established reservoirs.

Two other Shell-operated projects now under construction or undergoing commissioning are Coulomb Phase 2 and Appomattox in the gulf. In September Shell reported start of production at Stones, which lies in 2,900 m of water.

Norway authorizes Faroe to operate Oselvar, Trym

Norway's Petroleum Safety Authority has authorized Faroe Petroleum Norge to take over operatorship of Oselvar and Trym fields in the southern Norwegian North Sea from Dong E&P Norge AS. Oselvar field lies on Blocks 1/2 and 1/3, about 17 miles southwest of Ula. The field was developed using subsea wells. Production started in 2012 (OGJ Online, June 10, 2009).

Trym field lies on Block 3/7, which is nearly 2 miles from the median line with Denmark. Trym also was developed using subsea wells. Production began in 2011.

Faroe previously acquired 50% interest in Oselvar and Trym fields from Dong.

MOL raises production from Pakistan's TAL block

The Mardan Khel-1 exploration well, drilled in May 2015 on TAL block in Pakistan's Khyber Pakhtunkhwa province, will add 10,700 boe/d to the block's output, which now has reached 90,000 boe/d, MOL Group reported.

Wholly owned MOL Group subsidiary MOL Pakistan Oil & Gas Co. BV operates TAL with 8.4% interest.

The Mardan Khel-2 and Mardan Khel-3 appraisal wells also have been spudded, MOL said .


Indian refiners sign MOU for proposed megarefinery

Public-sector refining firms Indian Oil Corp. Ltd. (IOC), Bharat Petroleum Corp. Ltd. (BPC), and Hindustan Petroleum Corp. Ltd. (HPC) have formed a consortium to pursue a previously announced plan to jointly develop a grassroots 60 million-tonne/year integrated refining and petrochemical complex in India's Maharashtra state. The firms signed a memorandum of understanding on Dec. 7 to carry out preliminary activities for setting up the planned megarefinery as a joint-venture company, the companies said in filings to India's BSE Ltd. and National Stock Exchange of India Ltd.

IOC, BPC, and HPC previously enlisted Engineers India Ltd. to carry out a detailed feasibility study for the complex, with the site selection for the project already under way in consultation with the government of Maharashtra.

To be built in two phases, the complex would produce gasoline, diesel, LPG, and jet fuel, as well as other feedstock for Maharashtra's petrochemical industry.

Phase 1 of the refinery would include a crude processing capacity of 40 million tpy, with an additional 20 million tpy of capacity to be commissioned following completion of Phase 2.

Implementation for the project likely would be 7 years following acquisition of a land site, India's Minister of Petroleum and Natural Gas Shri Dharmendra Pradhan said in April.

If realized, the state-owned Maharashtra complex would displace the 33 million-tpy refinery operated by Reliance Industries Ltd. at its two-refinery, 60 million-tpy Jamnagar manufacturing complex to become India's largest refinery.

Lotte Chemical to expand ethylene capacity at Yeosu

Lotte Chemical Corp., Seoul, is planning to raise ethylene production by 200,000 tonnes/year at its Yeosu petrochemical complex in the South Korean province of Jeollanam-do.

Increased ethylene output would result from conversion of the plant's current 1 million-tpy naphtha cracker to run on a feedstock of propane gas, the company said.

Alongside expanding ethylene production to 1.2 mllion tpy, the project also would increase the complex's 520,000-tpy output of propylene to 620,000 tpy, Lotte said.

The expansion additionally would involve installation of gas turbine generators based on byproduct methane as part of a plan to increase the complex's ability to generate its own electricity, as well as reduce its emissions of greenhouse gases.

If approved, construction on the 300 billion-won expansion is scheduled to begin during first-half 2017, with new capacity due for startup by 2018.

Once in service, the Yeosu expansion would increase Lotte's South Korean domestic production of ethylene to 2.3 million tpy and overall global output to 4.5 million tpy by yearend 2018, the company said.

Contract let for UAE sour gas plant expansion

Abu Dhabi National Oil Co. subsidiary Abu Dhabi Gas Development Co. (Al Hosn Gas) and joint-venture partner Occidental Petroleum Corp. have let a contract to UK-based Amec Foster Wheeler PLC (AFW) to provide front-end engineering and design services for the JV's recently announced plan to expand capacity of the Al Hosn sour gas plant by 50%.

The FEED contract will cover a design concept for the proposed expansion, including engineering of units to expand the plant's processing capacity as well as all associated off sites and utilities required to integrate new units with existing installations at the site, such as gas gathering infrastructure, the main gas plant, product pipelines, and the sulfur granulation plant.

The ADNOC-Oxy JV will reach final investment decision on the expansion following AFW's delivery of FEED, which is scheduled to be completed by fourth-quarter 2017. A value of the contract was not disclosed.

If approved, the expansion would increase the plant's gas processing capacity to 1.5 bcfd.

While the JV has yet to reveal an estimated timeline or cost for the project, ADNOC said the plant's added capacity cold become operational within the life span of the UAE operator's new 5-year business plan, which is part of the company's 2030 Strategy approved by Abu Dhabi's Supreme Petroleum Council in early December.

Located at the Shah sour gas-condensate onshore field, southwest of Abu Dhabi City, UAE, the $10-billion Al Hosn sour gas plant was formally commissioned in early 2016 already operating at its nameplate processing capacity of 1 bcfd, which it reached in July 2015 (OGJ Online, Apr. 26, 2016).

Comprised of two gas processing trains and four sulfur recovery units, the plant now produces 500 MMcfd of network gas, 4,400 tonnes/day of natural gas liquids, 33,000 b/d of condensates, and about 9,000 tonnes/day of granulated sulfur.


QP to merge LNG giants Qatargas, RasGas

Qatar Petroleum (QP) plans to integrate Qatargas and RasGas Co. Ltd., forming a combined company will retain the name Qatargas and operate all of Qatar's LNG ventures.

Qatargas operates seven LNG trains with production capacity of 42 million tonnes/year, expansion of which came through projects in partnership with ExxonMobil Corp., Total SA, ConocoPhillips, Royal Dutch Shell PLC, and Mitsui & Co. Ltd.

RasGas operates seven LNG trains with production capacity of 37 million tpy with a fleet of 27 LNG carriers under long-term charter agreements with ship owners. It also has developed offshore and onshore facilities for the extraction, processing, liquefaction, and storage of gas from Qatar's North field, a primary gas source for both firms.

The integration process will start immediately and is expected to be completed within the next 12 months. QP says "the existing operations groups within both companies will not be impacted at all by the integration."

Petronas reports first LNG production from Satu

Malaysia's Petronas reported the start of LNG production from its first floating LNG (FLNG) facility offshore Sarawak.

Natural gas comes to the Satu FLNG facility from the KAKG-A central processing platform in Kanowit field (OGJ Online, Nov. 17, 2016). The gas is treated and liquefied by the Satu's nitrogen-based liquefaction unit.

The Satu facility is expected to reach commercial operations in first-quarter 2017. At 365 m in length, the Satu has a processing capacity of 1.2 million tonnes/year.

TransCanada to advance Saddle West gas project

NOVA Gas Transmission Ltd., a wholly owned unit of TransCanada Corp., will move ahead with its $655-million (Can.) Saddle West project in the Western Canadian Sedimentary Basin. The project, expected to be in service in 2019, will increase total gas transportation capacity on the northwest portion of the system by 355 MMcfd.

Saddle West will include 29 km of 36-in. pipeline looping of existing mainlines, the addition of five compressor units at existing station sites, and new metering facilities.

"This project will increase capacity in a critical area of the NGTL system that connects and transports growing supplies of unconventional natural gas," said Karl Johannson, TransCanada executive vice-president and president, natural gas pipelines. Once completed, it will serve producers in the Montney, Duvernay, and Deep basin areas.

An application to construct and operate the project will be filed with Canada's National Energy Board in third-quarter 2017, and construction is expected to start in 2018.